Australia’s most delicate housing bubble snowflake is at it again today:
The dire state of housing affordability revealed earlier this week surely confirms the harm caused by Australia’s badly designed capital gains tax.
The Housing Australia 2017report, published on Tuesday, comes from perhaps Australia’s least partisan think-tank – the Committee for the Economic Development of Australia – which draws its views from “750 of Australia’s leading businesses, organisations and academic institutions”.
And the cool-headed economists asked to compile this year’s report pass a damning judgment on the way the housing market has been affected by the Howard government’s reforms to the way capital gains tax works.
The report notes that prior to the change, “capital gains on investment properties were taxed at their real values at investors’ marginal income tax rates” but that afterwards “the capital gains tax (CGT) discount system was reformed such that only 50 per cent of capital gains would be taxed, albeit at nominal values, to encourage greater levels of investment”.
So far, so good. Tax incentives that actually create new investment, and new jobs, can be quite a good thing.
However, that is not what happened when the CGT discount was applied alongside Australia’s negative gearing laws – which, the report notes, were already “among some of the most generous within the OECD”.
What it created instead was a feeding frenzy for accountants and banks, who were able to advise their clients to borrow up big and buy investment properties.
…So there are two reasons to reduce the discount.
One is that it is fundamentally unfair to ask households who rely on wages to pay proportionally more tax than those that use negative gearing and CGT to minimise tax.
Secondly, the monstrous credit bubble this tax law has stoked has shut a generation out of the housing market.
Yada, yada, yada. Hey Rob, this battle is already won. Labor has adopted MB suggestions for negative gearing and capital gains reforms and is going to win in a landslide. You’re just virtue signalling now.
The new battlefront isn’t tax, it’s immigration. That’s the new house price pump that’s been primed by the bubble-cultivating central planners. They aren’t planning to address shortages of anything. On the contrary, they are planning to create them for renters and buyers via a people flood.
If you really give two hoots that authorities have “shut a generation out of the housing market” then get over your wowserishness and demand immigration cuts.
We need you. Youth needs you.
